Question

Conduct an internal environmental analysis of the company. What resources does the company possess? What about Capabilities? Which resources or capabilities appear to be sources of competitive advantage?

Uber Technologies, Inc

Answer 1

Internal environmental analysis of Uber Technologies, Inc-

Uber is a cutting edge organization, that was established in 2009. It splendidly interfaces the transportation business with innovation by means of ride- sharing application.

Uber is a well known brand. It has huge number of vehicles to serserve it's customers. Uber has a very simple mission but it has a huge impact on daily activities of human around the world that is “Transportation as reliable as running water, everywhere, for everyone” (Uber2016). From that mission, they believe in creating possibilities for riders, drivers, and cities.

Nowadays, Uber has expanded the operations to 410 cities in over 60 countries around the world.m oreover, they have provided many transportations and logistic services; especially in Singaporefor instance UberX, UberXL.

Resources-

Some of Uber's key resources include its network (Drivers & riders). Their Platform (apps) for both the rider and driver has been an integral resources. It's focus on improving its algorithms and data analysis. Their analysis is also directed towards the growth of their network.

Capabilities-

Potentially provide drivers with "flexible and independent jobs".

As Uber does not require cars to be hailed, its drivers can more easily pick up customers in less built up neighborhoods.

Reduce cost per riders.

Cut congestion, reduce pollution, reduce mass traffic and increase living standard of people.

Resources and capabilities to be source of competitive advantage-

The first candidate are network effects, which are often a major source of competitive advantage for platform businesses. The network effects mean that the value of the platform for the user increases with the number of users on the platform. There are two kinds of network effects: direct and indirect. Direct network effects are among users of the same kind. A good example is old-fashioned telephone. The value of a telephone for me is very low if there is no-one to call. If all my friends, business partners and others have telephones, the value of having one is very high. Indirect network effects are between different kinds of users of a platform. A good example are gaming consoles like Sony PlayStation, Nintendo Wii or Microsoft Xbox. Different types of users in this case are players and game developers. Players want a game console with a wide array of games to choose from and game developers will develop games for a console with a large number of players they can sell to.

In businesses with strong network effects, these can serve as a barrier to entry because new entrants need to simultaneously build different types of users. In Uber's case both riders and drivers need to be present on the platform in significant numbers. Building this network is costly and also means that small initial advantages can prove impossible to catch-up because if the network effects in the first mover's platform have already kicked in and reached critical mass, this platform is much more attractive for new users and will likely increase the gap to new competitors.

The second source of competitive advantage could be the brand. Because of its brand and reputation Uber can easily attract drivers and passengers in new locations. Its name has become synonymous with ride-hailing (i.e. technology enabled taxi services) as 'taking an Uber' entered urban speech as a superior alternative to taxi in many locations. This reputation likely means that Uber would be first choice for riders. However, price sensitivity of most customers most probably means Uber's brand alone would not enable Uber to charge higher prices for its service unless it could differentiate the service in a valuable way from other ride-hailing platforms.

Operational excellence could be another source of competitive advantage. However, in Uber's case the platform development and maintenance is a fairly simple affair from operational point. Most of the tasks involved with purchasing, maintenance is outsourced to drivers and the rest is technology-enabled, which levels the field for different platforms and would most probably not be a source of advantage for Uber.

Is Uber able to achieve cost advantage? Costs could be divided to those on Uber's side and those on drivers' side. On the one hand, there are economies of scale in building and operating a software platform, which is a major Uber resource. Smaller competitor have to build essentially the same features, cost of which is spread over smaller number of users. On the other hand, there are also economies of scale in operating larger fleets of cars, which give disadvantage to Uber's model of large number of individual drivers compared with traditional taxi fleets. Uber has also additional costs with global marketing, branding and lobbying. Other costs (e.g. fuel) are essentially the same for all competitors. It is unclear whether Uber will be able to achieve cost advantage, but the prospects of having a significant advantage in this area are slim.